Ecommerce & Digital
Amazon Advertising: What Your ACOS Target Should Actually Be
1 September 2025
ACOS targets on Amazon are one of the most widely misunderstood metrics in ecommerce. Most sellers pick a target based on what sounds reasonable, what the platform suggests, or what a competitor is rumoured to be running at. The number should come from somewhere else entirely: your own margin structure.
An ACOS target that is not derived from your specific margin is not a target. It is a guess dressed up as a strategy. Reading your Amazon analytics properly is where it starts.
What ACOS actually measures
ACOS, Advertising Cost of Sale, is the percentage of attributed sales revenue spent on advertising. An ACOS of 25% means you spent £25 in advertising for every £100 of revenue attributed to those ads.
Lower ACOS is not automatically better. The correct ACOS target is the one at which your advertising spend produces profitable sales, not the lowest number you can achieve. Cutting ACOS by reducing bids might improve the ACOS metric while reducing the volume of profitable sales. Increasing ACOS by raising bids might generate more profitable sales even though the percentage is higher.
Calculating your break-even ACOS
Break-even ACOS is the ACOS at which the advertising generates zero margin contribution after all costs. At this point the sale is covering cost of goods, fulfilment, Amazon fees, and advertising, but generating no profit.
The calculation is: Break-even ACOS = Gross margin percentage, where gross margin includes all costs except advertising.
If your product sells for £30, costs £8 to manufacture, £4 to fulfil, and Amazon takes £6 in fees, your costs before advertising are £18, leaving £12 gross margin on a £30 sale: a gross margin of 40%. Your break-even ACOS is 40%. Anything below that is profitable on an attributed basis. Anything above it is loss-making on attributed sales.
Most sellers do not know their break-even ACOS because they have not done this calculation for each ASIN. Without it, they are flying blind.
Target ACOS versus break-even ACOS
Break-even ACOS is not your target ACOS. Your target should be below break-even, because you need advertising to generate a margin contribution, not just cover its own cost.
How far below depends on your strategy. A business in launch mode, building review velocity and search ranking, may be willing to treat this as a launch advertising investment and run at or near break-even ACOS on certain products because the ranking benefit has long-term value beyond the attributed sales. A mature product with established ranking should be generating a meaningful margin contribution from advertising, which means target ACOS significantly below break-even.
A common heuristic is to set target ACOS at 50-70% of your break-even ACOS. On a product with 40% break-even ACOS, that means a target of 20-28%. The right number for your business depends on your margin structure, your competitive position, and your growth strategy.
TACOS: the number that matters more
ACOS measures the ratio of advertising spend to attributed sales. It misses the organic sales that advertising helps generate, because Amazon’s attribution model only credits advertising with the sales it directly generates, not the organic ranking improvement that advertising investment produces over time.
TACOS, Total Advertising Cost of Sale, divides advertising spend by total sales including organic. As a product builds organic ranking through advertising investment, the TACOS falls even if the ACOS remains stable, because organic sales grow without additional advertising cost.
Tracking TACOS alongside ACOS, particularly when reviewing Amazon Europe data across multiple marketplaces, tells you whether your advertising investment is building the organic presence that reduces your long-term dependence on paid traffic. A falling TACOS over time with stable or growing total revenue is a sign that the strategy is working.
Maebh Collins is a Chartered Accountant (FCA, ICAEW) with direct operational experience managing Amazon advertising across European marketplaces and building margin-based ACOS frameworks for ecommerce businesses.
Maebh Collins is a Chartered Accountant (FCA, ICAEW), Big 4 trained, with twenty years of experience building and running international businesses. She specialises in finance transformation, ecommerce operations, and digital strategy.